Time varying trend inflation and inflation volatility: The case of China and India

Alex, Dony (2019) Time varying trend inflation and inflation volatility: The case of China and India. [Working papers (or Preprints)]

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We investigate the importance of time varying trend inflation in explaining the inflation process in the two emerging economies, China and India. Our analysis is based on an unobserved components stochastic volatility model of inflation. We decompose inflation into permanent stochastic trend and transitory component. We find that trend inflation has been the dominant factor for determining inflation in China and India since 1990s. We also investigate the time varying volatility of inflation using a constant mean stochastic volatility model. The results suggest that during the years from 2000 - 2008, trend inflation was most stable and also volatility was the least and during the Great recession there was an increase in both the trend inflation and volatility.

Item Type: Working papers (or Preprints)
Keywords: Trend-inflation gap decompositions | Non-linear state space models | Stochastic volatility | Trend inflation | Bayesian estimation
Subjects: Social Sciences and humanities > Economics, Econometrics and Finance > Economics
JGU School/Centre: Jindal School of Liberal Arts & Humanities
Depositing User: Mr. Syed Anas
Date Deposited: 19 Apr 2022 07:06
Last Modified: 19 Apr 2022 07:06
Official URL: https://dx.doi.org/10.2139/ssrn.3334250
URI: https://pure.jgu.edu.in/id/eprint/2452


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